Page 29 - Azerbaijan State University of Economics

Hashim Al-Ali: Towards a realistic medium term macroeconomic and fiscal framework and
outlook for the Somali national economy (2017- 2019)

Accordingly, and in order to mitigate the negative impact of the external shocks on fiscal
environment, within this context, the aim of the Somali government is to achieve fiscal balance
and lessen the reliance on external donors’ grants, enhancing revenues, widening the fiscal space,
achieving a rational and optimal allocation of the limited financial resources, in the future
budget(s), in order to curtail the domination of recurrent expenditures, to enhancing the capital
expenditures and to developing expenditure priorities for various ministries, government
agencies and regional states. Notwithstanding, to achieve these goals, the Ministry of Finance
(MoF) has come up with the strategy “Policy and Priorities as well as PFM ACT for the purpose
of preparing the general government budgets for years 2016-2020”, in compatibility with the
basic objectives and strategic focus of the “National Development Plan” document.

Somalia Public Accounts Outlook and the Fiscal Framework during the period 2017-2019

Previous section has highlighted the Government’s budget and public accounts process and
movements during the period 2013-1016, and how the SNDP is going to assumes the direction
and trajectories of public sector‘s accounts components behaviour and path, during the plan
period (2017-2019). This section, notwithstanding, would set out the assumptions and main
factors that will drive revenue forecasts and the direction of government spending, for the period
of the SNDP. These revenue estimates, together with an assessment of the absorptive capacity of
the economy and the government’s ability to execute its budget, in a sound and effective manner,
provide the basis for developing a broad course for Government expenditures, in line with the
main macroeconomic objectives and the calculated positive movements of the main
macroeconomic variables, and growth trajectories thereof, during the plan period.

It is important to note that, because of the lack of required economic statistical data, it is quite
difficult to formulate a feasible revenue forecasting model and to numerically articulating such a
model, for the Somali economy at this time, though a mixed approach of qualitative assumptions,
embedding experts’ views, and simple functional interrelation and correlation, was attempted
and calibrated, by the adopted aggregate macro-fiscal modelling approach.

Having said that, and given the lacking and paucity of needed statistical data and other related
constraints, an attempt has been made to establish an overall direction and structure of public
sector accounts, from both revenue resources perspective and alignment of expenditure trends with
the strategic objectives, and envisaged development path during the SNDP period. Accordingly, a
consistent, realistic and appropriate approach has been adopted to forecasting and estimating
various revenue components, and expenditure streams of the fiscal framework of the Somalia,
during the years 2017-2019. Consequently, the statistical data obtained from MOF and
supplemented by IMF-SMP report published May 2016, it showed that the main contributors to
domestic revenue in 2016 budget were; customs (trade) taxes (duties), non-tax revenue and taxes
on goods and services (GST). These have contributed by; 60.5 percent, 25.2 percent and 10.4
percent to the total domestic revenue, respectively. Adding up these three components contribution
to domestic revenue, would indicate more than 96 percent of domestic revenue is generated by

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